Sorrell: POG Will Have To Merge Agency Brands

WPP this morning reported organic revenue growth for the third quarter of 5%, best of the major holding companies reporting so far.

By comparison, Omnicom earlier said its Q3 organic growth was 4.1% while Publicis and Interpublic reported 3.5% and 2.8% growth respectively.

Pivotal analyst Brian Wieser wrote that WPP’s Q3 performance was “the company’s best quarterly results in more than two years.”

And those results were dragged down a bit by the data and investment division, Wieser said, noting that the holding company would have achieved 5.4% organic growth but for investments to that unit.

Geographically, WPP achieved growth in all regions, including struggling Europe where it posted 2.6% organic growth. North America was up 4.6%, the UK was up 8% and all other markets were up 5.8%.

“We remain focused on achieving our 2013 targets,” WPP CEO Martin Sorrell told analysts during a Thursday morning call to discuss results. Among those targets is full year organic growth of greater than 3%, which is almost assured barring a shockingly poor performance in the fourth quarter. Through the first nine months of the year the company’s organic growth stood at 3.3%.

And the company said it expects fourth quarter organic growth “in all regions and business sectors.”

“We’re very well positioned” for 2014, which the company believes will be an even better year than the current one, Sorrell said. The Russian Olympics, World Cup and U.S. mid-term elections will help next year’s performance.

Sorrell took a swipe at U.S. politicians for continuing to put off dealing with the deficit issue. By doing so they create more caution and uncertainty among business leaders and for the economy, he said. He added that the U.S. Sequestration policy impacted WPP’s first half results, but didn’t elaborate.

But the news was more positive than negative for the North American market, helped by media planning and buying assignments from Gillette and Nestle.

That said, just about all regions and disciplines were running on all cylinders for the holding company. Sorrell gave shout-outs to JWT, Y&R and Grey for strong results as well as to media arm GroupM. “The U.S. is doing much better than it was,” he said. The weakest link by discipline was public relations and public affairs, which is improving but “needs a little more work.” And those disciplines have opportunities in the social media and marketing technology spheres that they need to take better advantage of, he said.

Sorrell took several more swipes at POG, saying that by definition the way the merging companies have positioned the combination has already led to greater agency review activity. “They’re promising tremendous benefits and clients are saying let’s see how I benefit,” through the review process, said Sorrell.

He also challenged the assertion by Publicis and Omnicom that they wouldn’t merge agency brands. He noted that the two companies have up to seven traditional agency brands in many markets. “They have too many assets that are not a growing part of the business,” he said. “They’re going to have to [consolidate] if they’re going to make it work.”

Sorrell told analysts that he has also heard from multiple sources that the $500 million that POG originally earmarked for savings over a number of years is being reduced. “Clients are saying we want part of it. It’s our money not your money.”

WPP reported net new business of $3.716 billion in the third quarter, compared to $1.415 billion in the third quarter of last year and nearly $7.9 billion in the first nine months, compared to $5.375 billion in the same period last year.

Total Q3 revenue was up 7.4% to approximately $4.34 billion. 

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